Others will seek funds for expansion and, fortunately, recent sentiment from finance specialists suggests there is heightened investor interest in the sector spurred by good post-pandemic prospects, albeit with headwinds to overcome.

On the face of it, travel looks a good bet. Barclays recently tracked consumer spend among travel agents and found transactions had grown almost 20% year-on-year in four weeks straddling April and May, with spend up 9.9%. It said travel agencies and airfares comprised the highest of all consumer spending sectors. Similarly, Nationwide predicted the average spend per person on holidays this year would reach £1,500.

Kelly Cookes, Advantage Travel Partnership chief commercial officer, said the Barclays data “supports the fact that travel is a great option for investors”.

She added: “My personal view is that travel is a very viable option for private equity [PE] at the moment given the performance. The pent-up demand created by the pandemic has led to a bumper year of sales so there has never been a better time to get into the industry, especially in terms of agents, as their value is higher than it has been in years.”

Data from Grant Thornton shows a big spike in mergers and acquisitions generally in 2022, with nearly 30 deals worth almost £5 billion. The first quarter of 2023 saw 10 UK deals with revealed transaction value totalling £273 million. They included Travel Counsellors’ acquisition of homeworking rival Holidaysplease in March.

Travel Counsellors is backed by investment firm Vitruvian Partners, which acquired it in 2018. Grant Thornton said: “The deal was Travel Counsellors’ first acquisition in its almost 30-year history and follows record trading in January and February.” 

In February, Flight Centre Travel Group acquired Scott Dunn for £121 million, giving it a foothold in the UK and US luxury travel markets, financed mainly by a share issue. Trade sales accounted for eight of these deals but Grant Thornton said: “We anticipate more PE activity towards the end of the year, when there’s more visibility on consumer spending.”

However, Grant Thornton estimates 60% of UK acquisitions in the first three months of 2023 involved accommodation brands, mainly from foreign investors, with operators and agents comprising just 10% of activity.

Another view comes from Deborah Potts, director of travel specialist Summit Advisory, who said: “We certainly are talking to more and more European-based potential trade buyers.”

However, she described a more nuanced picture. “Private equity that is already invested in the sector is in a different place to those houses which have never yet dipped their toes in the water. The former is in general open to further acquisitions, provided their current investment or investments are demonstrating strong post- Covid recovery. For these players, a ‘Buy and Build’ strategy presents more opportunities than slower, organic growth.

“It is still possible to entice a new [investment] house into the sector, but equally, we know of ones that were very interested in entering the travel industry with an acquisition pre-Covid that have since ruled it out for the foreseeable future. There have been some new investment groups coming into the industry but some of these were enticed in by ‘distressed’ opportunities. It remains to be seen if they can deliver successful turnarounds when they are pretty new to the industry.”

There is certainly room for PE interest; research by advisory specialists RSM UK confirms 43 UK travel and tourism-related PE portfolio companies were acquired in the pre-2020 period, but only 14 since. Activity peaked in 2018 when there were 15 investments – meaning some are now seen as mature and ripe for passing on. 

“Travel and tourism is an older portfolio than the rest of the PE set,” said Jasper van Heesch, RSM UK’s director and private equity senior analyst. 

He believes there may be pressure on some PE investors to exit where portfolio companies have matured. Private equity firms usually look to invest for three to five years to fit with the typical fund cycle of 10 years.

“There is an opportunity for other investors to buy those businesses where the PE investor is feeling the pressure to exit,” van Heesch said, adding these could be other PE investors or trade buyers.

He added some travel segments remained attractive despite the squeeze on incomes. “‘Silver surfers still have good discretionary spend,” he said. “Even in a climate where affordability is under pressure, there will be winners.”

There is, however, a spanner in the works with higher interest rates the new norm, pushing up the cost of credit for PE-backed deals. He added interest rate rises “had not fully played out yet, so PE will be cautious”.

“They are doing more and more granular due diligence on investments. They are looking at employment and energy costs and customer and market profile.”

However, he maintained the sector was still attractive “as long as margins are strong with good annual recurring revenue and good growth prospects”. He added another consideration was the CAA’s working capital restrictions, which PE could help overcome, allowing Atol holders to expand.

The headlines may be full of gloom about inflation and interest rates, but for travel, it seems investors’ doors could be wide open.